HCS HB 191 -- JOB DEVELOPMENT

SPONSOR:  Flook

COMMITTEE ACTION:  Voted "do pass" by the Committee on Job
Creation and Economic Development by a vote of 14 to 0.

This substitute changes the laws regarding several economic
development programs and establishes the Small Business and
Entrepreneurial Growth Act.

TAX CREDITS AND EXEMPTIONS

The substitute:

(1)  Allows business headquarters to receive tax credits for new
or expanding businesses.  Expansions at headquarter facilities
will be considered separate business facilities and entitled to
the credits if at least 25 new employees and at least $1 million
of new investment are attributed to the expansion.  Buildings on
multiple noncontiguous properties will be considered one facility
if they are in the same county.  No headquarters will receive the
credits for facilities commencing or expanding operations after
January 1, 2020;

(2)  Authorizes, beginning January 1, 2010, a state and local
sales tax exemption for all electrical energy, gas, other
utilities including telecommunications services, and machinery or
equipment used in a business that is engaged in data processing,
hosting, Internet publishing and broadcasting, and web search
portals.  The business must be located in an underground mine
that is at least two million square feet.  The business cannot
receive these exemptions and simultaneously receive benefits from
the Quality Jobs Program;

(3)  Authorizes the Department of Economic Development to
allocate up to $5 million in tax credits per year to encourage
equity investment in technology-based early stage Missouri
companies, commonly known as angel investments.  Investors who
contribute the first $500,000 in equity investment to a qualified
Missouri business may be issued a tax credit equal to 30% of the
investment or 40% if the qualified business is in a rural area or
distressed community.  An investor can receive a credit of up to
$50,000 for an investment in a single, qualified business or up
to $100,000 for investments in more than one qualified business
per year.  Credits can be carried forward for up to three years
or transferred;

(4)  Revises the definition of "technology business project" as
it relates to the Missouri Quality Jobs Act to include certain
clinical molecular diagnostic laboratories;

(5)  Specifies that if the department fails to respond within 30
days to a Quality Jobs Program applicant's notice of intent, the
notice is deemed a disapproval.  Currently, the notice is deemed
an approval if the department fails to respond within 30 days;

(6)  Specifies how the department must apply certain definitions
when a business that has already received an approved notice of
intent later files another notice of intent;

(7)  Eliminates the per-company annual cap on technology business
projects.  Currently, the cap is $500,000 per business, per year;

(8)  Eliminates the per-company annual cap on high-impact
projects.  Currently, the cap is $750,000 per company, per year;
and

(9)  Eliminates the annual cap on the Quality Jobs Program.
Currently, the annual cap is $60 million.

SMALL BUSINESS AND ENTRPRENEURIAL GROWTH ACT

The substitute establishes the Small Business and Entrepreneurial
Growth Act which, beginning January 1, 2010, allows small
business employers who increase their total payroll by increasing
the number of jobs and meeting certain qualifications to retain
the Missouri withholding tax from the salaries of the newly
created jobs for one year.  If the employer pays at least 50% of
the cost of the premiums for health insurance for all employees,
the withholding tax can be retained for two years.  No employer
retaining these withholding taxes will be eligible for the
benefits under the Quality Jobs Act.

QUALIFIED EQUITY INVESTMENT (NEW MARKETS) TAX CREDIT

Currently, no qualified equity investments can be made under the
New Markets Tax Credit Program beyond Fiscal Year 2010.  The
substitute extends the date through FY 2012 and increases the
program's tax credit cap from $15 million to $27.5 million per
fiscal year.

QUALIFIED RESEARCH EXPENSES (RESEARCH AND DEVELOPMENT) TAX CREDIT

Currently, no tax credits for qualified research expenses can be
approved, awarded, or issued.  The substitute removes these
restrictions and allows a tax credit equal to no more than 6.5%
of a taxpayer's qualified research expenses.  The annual
aggregate cap on the amount of these tax credits that can be
authorized by the department is $10 million.

Qualified research expenses will be limited to those incurred in
the research and development of agricultural biotechnology, plant
genomics products, diagnostic and therapeutic medical devices,
and prescription pharmaceuticals consumed by humans or animals.
Expenses incurred in the research, development, or manufacturing
of power system technology for aerospace, space, defense, or
implantable or wearable medical devices are also permitted.

The department director may allow a taxpayer to transfer up to
40% of the tax credits issued, but not yet claimed, between
January 1, 2010, and December 31, 2016.  The substitute requires
that the department director act between August 1 and August 15
on tax credit applications filed between January 1 and July 1 for
claims from the previous year.

The formula is specified by which tax credits will be issued if
the eligible claims for the credits exceed the annual cap.  No
one taxpayer can be issued more than 30% of the total amount of
tax credits authorized in any calendar year.

SCIENCE, TECHNOLOGY, BUSINESS, AND EDUCATION DISTRICTS

The substitute allows the governing body of a municipality to
establish a science, technology, business, and education district
(STBE).  STBE projects may be implemented in the district
according to an STBE plan.  The district, plan, and project must
be established or adopted by ordinances, and the substitute
specifies the requirements of an STBE plan and the findings a
municipality must make before adopting an STBE plan.

Following a municipality's establishment of an STBE district and
adoption of an STBE plan and one or more STBE projects, the
targeted industry cluster state (TICS) revenues estimated for the
businesses within the STBE district will be available for
appropriation by the General Assembly from the General Revenue
Fund to the department for distribution to the treasurer of the
municipality.  Municipalities cannot commit any TICS revenues
prior to an appropriation being made from the General Revenue
Fund to the department for a particular STBE project.  The
municipality's treasurer will deposit the TICS revenues into a
segregated fund known as an STBE Projects Financing Fund.  The
State Treasurer will be the custodian of the fund and may approve
disbursements.  The initial appropriation or disbursement will
not be made until the department director has approved an STBE
plan and projects.

The substitute specifies that "targeted industry cluster state
revenues" means:

(1)  Fifty percent of the incremental increase in the general
revenue portion of eligible state sales tax revenues received
under Section 144.020, RSMo.  Sales tax revenue attributable to
retail sales will only be included in this amount if it can be
proven that the sales tax revenue is attributable to new sources
which did not exist in the state in the baseline year; and

(2)  The state income tax withheld on behalf of new employees by
the employers at the businesses located within the STBE project.

The substitute requires the department director to approve an
STBE plan and projects if certain specified findings are made.
The initial appropriation of TICS revenues will not be made until
the department director, or his or her designee, finds that:

(1)  The STBE project will be completed and its obligations paid
within 25 years from the adoption of the municipal ordinance;

(2)  TICS revenues do not exceed 50% of the total STBE project
costs;

(3)  Municipal funding will provide funds for the STBE project
that equal at least 10% of the STBE's eligible project costs.
These funds must be available within 10 years following the
establishment of the STBE district;

(4)  At least one higher education institution has committed to
having a significant physical presence in the STBE district and
plans to offer educational resources in the STBE district such as
classrooms, curriculum, dedicated faculty, graduate students, and
defined partnerships with target industry clusters; and

(5)  The STBE plan and projects are financially feasible and will
result in a net benefit to the state.

Revenues will only be used to pay for specified eligible STBE
project costs.  The municipality is required to submit an annual
report to the department which includes certain specified
information.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of $312,113
to Unknown in FY 2010, $340,439 to Unknown in FY 2011, and
$350,654 to Unknown in FY 2012.  Estimated Cost on Other State
Funds of Unknown in FY 2010, FY 2011, and FY 2012.

PROPONENTS:  Supporters say that eliminating the cap on the
Quality Jobs Program will help Missouri create new jobs and
stimulate economic development throughout the state.

Testifying for the bill were Representative Flook; Associated
Industries of Missouri; Taxpayers Research Institute of Missouri;
Lee Langerock, Nodaway County Economic Development; David Leezer,
St. Louis County Economic Council; Advantage Capital Partners;
Missouri Chamber of Commerce and Industry; Missouri Growth
Association; Missouri Biotechnology Association; St. Louis
Regional Chamber and Growth Association; St. Louis Community
College; Missouri Community Colleges Association; Greater Kansas
City Chamber of Commerce; Montgomery City Growth, Incorporated;
and Burns and McDonnell Engineering.

OPPONENTS:  There was no opposition voiced to the committee.

Missouri House of Representatives
95th General Assembly, 1st Regular Session
Last Updated November 17, 2009 at 9:24 am